Having a strong supply chain is one of the most powerful tools you can have in your arsenal. Creating a solid network of all the organisations involved in delivering your product or service to your end customer – from vendors to producers, warehouses to retailers – is critical to keeping things running smoothly. In fact, it can make or break your success.
Here’s why they could be the key to making your supply chain even stronger.
Building confidence and trust
It might sound simple, but don’t under-estimate the importance of having confidence in and being able to trust each and every member of your supply chain. Early payments can help build this confidence – for both suppliers and customers alike.
If you’re a buyer, offering to pay early (for example in return for a small discount), signifies that you’ve got the cash ready and waiting, and are considerate of the fact that your supplier might benefit from a boost to their cash flow before the date their invoice is due.
For suppliers, being able to incentivise your customers to pay early by offering a small discount signals sound financial wellbeing. If you’re able to offer your services or products at a beneficial cost, it implies you’re not stretched to the last penny – which gives customers confidence and reassurance that you’re not at risk and they’ll be able to keep buying from you.
Access to better deals
It goes without saying that, if early payment benefits both buyer and supplier, there could be great deals attached to paying up early. When either side is empowered to use early payment as a tool for negotiation – whether that’s a reduction in price, a speedier delivery, or another mutually agreed benefit – it can help move things along exponentially, and might even lead to longer term process changes in your supply chain that keep things really efficient and effective.
If you’re a buyer that’s offering to pay early, you’re going one step further than avoiding a reputation as a nightmare customer that your supplier has to keep chasing: you’ll become a preferred choice.
When suppliers are stretched or at capacity, they’ll be in a position to choose who they work with. Customers or buyers with good reputations for paying on time (or, even better, early) are much more likely to make their way up the food chain of preference – and might even attract more suppliers looking to work with them, as a result of word of mouth, too.
Growth on both sides
It’s no secret that, for the SMEs and start-ups that form a bulk of the UK’s suppliers, cash is king. Offering early payment can be a real cash injection that helps SMEs out with their cashflow. And good cashflow means more money to invest and grow.
But the benefits aren’t one sided. If you’re a buyer that’s looking to grow, you’ll need your suppliers to be able to keep up with your ambitions – which will likely lead to an increased demand for goods or services. By paying them early and helping them grow, you’ll be helping them to help you grow, when the time comes.
Only as strong as your weakest link
When it comes down to it, your supply chain is only as strong as its weakest link – and late payment has a habit of breaking the bonds that the chain relies on. In fact, according to a recent survey of 500 UK decision makers, 86% agreed that one single late payment affects everyone in the supply chain. And, out of the 31% of businesses that admitted paying a supplier late, almost half say it was due to a late or failed payment from their customer.
So, if late payment has a knock-on, negative impact on everyone in a supply chain, imagine the knock-on, positive impact that early payment could have, if things were reversed?
How Early Pay can help
If reading this has convinced you that building early payment into your supply chain is something you should be looking at, you’re in the right place.
Our CEO, Anthony Persse, thinks it’s time to turn the conversation about late payment on its head: “By shifting towards a more positive conversation about ‘early payment’, we will do much more than simply improve payment performance. We will help create more jobs, deliver greater levels of investment and generate deeper social value with long-term sustainability at a time when the country needs it most.”
If you’d like more information, please get in touch with the team at [email protected] and we’ll be happy to help.